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German economist: "Russia's state bankruptcy is imminent"

2022-03-09T10:34:44.094Z


German economist: "Russia's state bankruptcy is imminent" Created: 03/09/2022 11:27 am By: Jonas Raab Kremlin ruler Vladimir Putin has brought Russia to the brink of another state bankruptcy with his attack on Ukraine. © picture alliance/dpa/Pool Sputnik Kremlin/AP | Alexei Nikolsky The sanctions imposed by the West in the wake of the Ukraine war allowed the ruble to smear in Russia and brough


German economist: "Russia's state bankruptcy is imminent"

Created: 03/09/2022 11:27 am

By: Jonas Raab

Kremlin ruler Vladimir Putin has brought Russia to the brink of another state bankruptcy with his attack on Ukraine.

© picture alliance/dpa/Pool Sputnik Kremlin/AP |

Alexei Nikolsky

The sanctions imposed by the West in the wake of the Ukraine war allowed the ruble to smear in Russia and brought the Kremlin to the brink of bankruptcy within days.

Moscow - The sanctions that the West imposed against warmonger Vladimir Putin in the wake of the Ukraine conflict are taking effect: In many places in Russia, the assembly lines are standing still, supermarket shelves have long been hoarded empty, the ruble is visibly declining.

On the international financial markets, too, Russia is as good as unregistered.

Although the Kremlin's treasury is well stocked, Russia is heading straight for another state bankruptcy.

The date of the probable non-payment has also already been determined.

As the financial news

service Bloomberg

reports, Russia has 49 billion dollars in government bonds outstanding in dollars and euros.

Marcel Fratzscher, President of the DIW Institute in Berlin, considers a national debt bankruptcy in Russia to be very likely in the coming months.

Because: Interest payments of more than 100 million dollars are due on March 16th.

A $2 billion bond issue is due to expire on April 4th.

No financial expert expects the Kremlin to meet these obligations.

Ukraine war brings Russia to the brink of bankruptcy - "most likely scenario"

"We see default as the most likely scenario," US investment bank Morgan Stanley wrote to clients on Monday (March 7).

The US rating agency Fitch also assumes that Putin can no longer service his national debt.

A default is "imminent," Fitch financial experts warned on Tuesday (March 8).

Russian government bonds have long been labeled as junk - by Fitch and by the other major rating agencies Moody's and S&P.

S&P already cut Russia's credit rating eight notches last Friday (March 4) to just below the default category.

At Moody's, the rating dropped to even lower junk levels due to "serious concerns about Russia's willingness and ability to service its debt."

Sanctions against Russia in the Ukraine war: Putin tries to cushion the consequences - unsuccessfully

Meanwhile, Putin and the Russian central bank are trying to cushion the economic and social impact of the western sanctions.

Since Wednesday (March 9), Russians are no longer allowed to buy foreign currencies from banks.

If you still have foreign currency, you can withdraw a maximum of 10,000 dollars.

The rest is paid in rubles.

As

Bild

reports, many ATMs in Russia have already run out of dollars and euros.

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With good reason: the ruble has slipped into the abyss.

A month ago, one euro was worth 85 rubles, today it's already 142 rubles.

The Russian central bank's interest rate hike from 9.5 to 20 percent also came to nothing.

Most prices in Russia have already risen by more than a third, several media reported.

Putin steers straight into state bankruptcy - how will things continue for Russia on the international financial market?

But how will things continue for Russia on the international financial market after Putin's invasion of Ukraine?

While a new Russian military column is probably rolling towards Kyiv and the Kremlin is increasingly threatening the West with counter-sanctions, the Kremlin is running out of money.

And this despite the fact that Russia's treasury is actually bulging, not least thanks to high oil and gas prices.

The credit watchdogs from S&P and Moody's emphasize that the main reasons for the increased risk of the Russian state bankruptcy are not the lack of money, but the consequences of the sanctions.

For example, the sanctions have frozen a large part of Russia's central bank reserves of around 640 billion dollars, which in turn enormously restricts their room for manoeuvre.

Russia again facing bankruptcy - memories of 1998

August 17, 1998 marks the blackest day in the economic history of the new Russia.

At that time, the government stopped servicing the domestic debt due to tight budgets and released the ruble for devaluation.

The financial markets tumbled.

Trust in Russia was gone.

After years of stability, the ruble lost 75 percent in just a few weeks.

Russian banks could no longer meet their obligations.

International financial organizations stopped supporting it.

Russia is threatened with bankruptcy again because of the Ukraine conflict - with far-reaching consequences for investors

Against this background, it is considered extremely unlikely that the Kremlin will meet the interest payments due on March 16th.

Even if Russia were to pay, it would therefore be uncertain whether creditors abroad would get their money.

Another problem for international investors: credit default insurance may not apply to some bonds.

Because Russia could settle debts in rubles, but should not transfer the money abroad.

If the bond payments are not made in the coming week, that would not mean that Russia would go bankrupt overnight.

After the first non-payment, a 30-day grace period usually begins, so the actual default would not occur until April.

(yeah/dpa)

Source: merkur

All news articles on 2022-03-09

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